Steel distributors and service centres in Europe hope domestic steelmakers will continue to limit output until the market returns to a level of balance between supply and demand, Kallanish heard from executives gathered at Eurometal’s Thursday meeting in Milan.

Cesare Viganò, head of ArcelorMittal CLN Distribuzione Italia, said European steelmakers started cutting output later than was expected. “We knew the challenges existing from May and action to reduce supply should have been taken a little earlier,” he noted.

Other executives at the event agreed with Viganò’s position. The general consensus was that these production cuts should continue until at least the end of this year, when apparent steel demand could look slightly better.

Apparent steel demand is currently suffering in Europe, mainly due to overstocking in the distribution sector. According to Eurometal, at the end of June, the index of stock volumes for flat steel service centres in Europe reached 107, versus 71 in June 2021. Market observers believe that until destocking in the distribution sector is completed, the European steel market will not see sentiment increasing firmly; this goes also for prices.

Andrea Gabrielli, head of Gabrielli Group, confirmed that July was very slow for the flats distribution sector – slower in fact than July 2020. "Historically, July is a month of good activity for our sector, but now apparent demand is blocked," he noted.

As widely reported by Kallanish in recent months, European steelmakers announced a series of production curbs, including temporary stoppages of blast furnaces and electric arc furnaces. These stoppages are linked to record-high energy costs, but they are also justified by the need to limit supply in an overstocked market.

“During the next months, the challenge for prices of coil products, for example, will also come from imports. It is likely that when the market will be capable to see higher domestic prices accepted, we will have the arrival of lower-priced import offers,” a source at the event added.

According to Kallanish, domestic HRC in Italy is currently traded with a premium of some €70-80/t on imports offers.